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Bemis Company, Inc. (BMS - Analyst Report) reported fourth-quarter 2013 adjusted earnings of 54 cents per share, in line with the Zacks Consensus Estimate but up 4% from the year-ago quarter. Earnings were at within the management’s guidance range of 50 cents – 56 cents per share.

Including facility consolidation and other costs, earnings per share in the year ago quarter stood at 38 cents. Compared to this base, earnings of 54 cents in the fourth quarter increased 42%.

Net sales slid 1% year over year to $1.219 billion, mainly due to unfavorable currency translation. Sales fell short of the Zacks Consensus Estimate of $1.22 billion. Decline in sales in U.S Packaging and Global Packaging offset increase in sales in the Pressure Sensitive Materials segment.

Cost of products sold decreased 1% to $988 million in the quarter. Gross profit declined 2% to $231 million. Gross margin remained flat at 19% in the quarter. Selling, general and administrative expenses decreased 4% to $120 million. Adjusted operating income remained flat at $100 million. Operating margin remained flat at 8% in the quarter.

Segment Performance

Net sales from the U.S. Packaging segment amounted to $707 million, down 1% year. Adjusted segment operating profit decreased 27% to $88.4 million from $121.4 million.

Net sales from the Global Packaging segment declined 3% to $378.3 million. Adjusted segment operating profit increased 156% to $25.6 million.

Net sales from the Pressure Sensitive Materials segment totaled $134 million, up 1% year over year. Segment operating profit was $8.4 million, down 5% from $8.8 million reported in the year-ago quarter.

2013 Performance

Bemis reported record adjusted earnings per share of $2.28, a 6% increase over $2.15 per share earned in the prior year and in line with the Zacks Consensus Estimate. Earnings were within the company’s guidance of $2.24 and $2.30. Including one-time items, such as facility consolidation costs and transaction-related gains and charges, earnings stood at $2.04 per share compared with $1.66 in the prior year, reflecting a 23% increase. Revenues came in at $5.03 billion, down 2% year over year, but in line with the Zacks Consensus Estimate.  

Financial Update

As of Dec 31, 2013, Bemis had cash and cash equivalents of $142 million, up from $114 million as of Dec 31, 2012. Total debt of the company increased to $1.44 billion as of Dec 31, 2013 from $1.43 billion as of Dec 31, 2012. Total cash flow from operating activities for 2013 was $373 million compared with $421 million in the prior year. Bemis repurchased shares 1 million of shares worth $77.3 million in 2013.

In July, Bemis expanded its Asia-Pacific foothold with the purchase of Foshan New Changsheng Plastics Films Co. (NCS). Headquartered in China, Foshan New Changsheng Plastics Films is a specialty film manufacturer. Incremental net sales from NCS are expected to be approximately $60 million annually, and the acquisition of this film platform is expected to provide cost and logistics benefits to support Bemis' broader Asia-Pacific growth strategy.
 
2014 Outlook

Management expects adjusted EPS in the range of 55 cents to 60 cents for the first quarter of 2014. For 2014, EPS is projected to range between $2.40 and $2.55.

Bemis expects cash flow from operating activities to exceed $500 million in 2014. The company expects capital expenditures in 2014 to range between $175 million and $200 million.

Our Take

Weak volume, cautious consumer spending environment, sluggish European economic outlook remain major concerns. However, savings from the Bemis cost reduction program and benefits from acquisitions will help offset these headwinds.

Neenah, WI-based Bemis Company is a global manufacturer of flexible packaging products and pressure sensitive materials sold primarily to the food industry. The company also sells its products to other customers in the chemical, agri-business, medical, pharmaceutical, personal care, electronics, automotive, construction, and graphic industries.

Bemis currently carries a Zacks Rank #4 (Sell). Another stock in the containers industry that is currently performing well and has a good visibility is Ball Corp. (BLL - Analyst Report) with a Zacks Rank #2 (Buy).

Peer Performance

Among the peers of Bemis Company, MeadWestvaco Corp. (MWV - Analyst Report) reported fourth-quarter 2013 adjusted earnings from continuing operations of 29 cents per share, reversing the year-ago quarter’s loss of 5 cents.

Silgan Holdings Inc. (SLGN - Analyst Report) posted adjusted earnings of 45 cents per share in the fourth quarter of 2013, a 4.2% decline from 47 cents a share in the year-ago quarter. Its results also fell short of the Zacks Consensus Estimate of 49 cents.

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